Payday loan at a low interest rate
If you need a new washing machine, or you want to purchase a car, then you are faced with a large expense that you may not have the money for. In such a case, it may be a solution to take out a payday loan. After all, you then quickly have the required money and you can pay off the amount in installments. Of course you pay interest with a payday loan, just like with any other form of borrowing. But how does that all work exactly?
What is a payday loan?
You also call a payday loan a personal credit. Credit is a financial term that means that a lender, such as a bank, provides a certain capital to a third party. In the case of a payday loan, this concerns a certain amount of money. The amount of this amount is determined in advance and is paid out in one go to the person who took out the loan. So if you take out a payday loan, you can quickly get the money you need.
And how does it go on?
Of course you don’t get that money just like that. After all, borrowing also means that you have to pay back the money at a given time. With a payday loan, the repayment of the loan is usually done in fixed installments, for example per month. This means that you repay a fixed amount each month to the lender. The installments are determined in advance and it is determined how much you must repay per installment. You also determine the duration of the loan. The term ends when the last installment has been paid back.
Interest in return
If you need money immediately and you do not have that amount in your account yourself, then it is a very nice solution that you have the option to take out a payday loan. But of course the lender does not just do that, he also wants something in return. That consideration is usually determined in the form of an interest rate. This means that you pay a fixed percentage of interest on the loan amount. This is therefore in addition to the amount that you pay as a repayment.
How much do you have to pay
You can therefore calculate the amount that you have to pay by adding up the amount for the repayment and the amount in interest. That is the monthly charge that you must pay during the term of the loan. How high that amount is, of course, depends on the amount that you have borrowed and the interest rate that has been set. With a payday loan this is all fixed in advance. So you can calculate in advance exactly what your monthly expenses are going to be.
The interest may vary during the term
The interest is fixed with a payday loan. This means that the percentage that you have to pay in interest does not change during the entire term of the loan. The interest rate is fixed in advance and therefore no longer changes. That way you know exactly where you stand. There are also forms of credit where the interest rate is not fixed, such as with a revolving credit. So there is no such flexibility with a payday loan. The advantage of this is that you will not be confronted with surprises.
You can also pay off faster
During the term of your loan it may happen that you have extra money at your disposal, for example because you have received a holiday allowance or because you have received a refund from the tax authorities. Then it is tempting to use that money to repay your loan extra, so that you have paid off the loan faster. With a payday loan, that is not allowed. After all, by repaying extra you shorten the term of the loan, so that the lender misses out on interest income. That is why extra or faster repayment usually results in a fine.
Disadvantages of a payday loan
Although a payday loan can be a solution when you are really embarrassed about money, it also has a number of disadvantages. As described, you are not usually allowed to just repay the fine fairly extra, which means that you cannot shorten the term of the loan. You are therefore bound to it for a certain time. In addition, the interest rate for this form of borrowing is generally higher than for, for example, a revolving credit. There is also little flexibility. Everything is precisely recorded in advance.
What should you take into account
If you want to take out a payday loan, you have to pay attention to a number of things. The level of the interest rate is of course very important. After all, this determines how much the loan will ultimately cost you. The percentage may vary, so it is advisable to have a calculation made at various lenders, so that you can find the most advantageous provider that best suits your situation. It is also important to take a good look at the conditions of a number of different lenders.
Your own financial situation
Finally, it is important that you take a good look at your own financial situation before you take out a payday loan. How high is your income and what are your fixed costs? Are your income stable over a longer period of time? After all, you must be able to pay the amount for the monthly repayment plus the amount of interest costs during the entire term of the loan. The lender will also look into this. So consider carefully whether you can actually pay the costs of the loan.